Stock markets to advance further on rising hopes for fiscal cliff deal

TORONTO – The Toronto stock market was set for a higher open Thursday, extending the gains of the previous session amid growing optimism that Democrats and Republicans will get a deal on averting a U.S. fiscal crisis by the end of December.

Traders also took in an earnings report from Royal Bank (TSX:RY) that beat expectations. The bank posted quarterly net earnings of $1.9 billion or $1.25 a share. Adjusted net earnings came in at $1.27 a share, beating estimates by a penny.

RBC also handed in record full-year earnings $7.5 billion, up 17 per cent from 2011.

The Canadian dollar gained 0.06 of a cent to 100.88 cents US.

U.S. futures were also higher as the Dow Jones industrial futures ran ahead 74 points to 13,031, the Nasdaq futures were ahead 19.5 points to 2,680 while the S&P 500 futures climbed 8.5 points to 1,415.6.

Traders have been focused on avoiding a so-called fiscal cliff at the end of December, which would result from the imposition of automatic steep spending cuts and tax increases. Markets have been volatile over fears that the combination would result in knocking the U.S. back into recession.

They were reassured Wednesday and bid stocks higher after House Speaker John Boehner said he was optimistic that a deal can be reached with President Barack Obama.

Optimism was further bolstered after Obama said that he believes that members of both parties can reach a “framework” on a debt-cutting deal before Christmas.

Commodity prices were also higher as January crude on the New York Mercantile Exchange rose $1.37 to US$87.86 a barrel.

December copper gained six cents to US$3.60 while December bullion was ahead $9.90 to US$1,728.70 an ounce.

In other earnings news, Gildan Activewear Inc. (TSX:GIL) said quarterly net income jumped to US$89 million or 73 cents per share, up from US$48.5 million a year ago. Ex-items, earnings came in at $94.9 million or 78 cents per share, a penny short of estimates. Gildan also said it will increase its quarterly dividend to shareholders by 20 per cent, which will be nine U.S. cents a share.

In the U.S., Tiffany & Co.’s third-quarter net income fell 30 per cent to US$62.3 million or 49 cents a share, missing forecasts by 14 cents. The jewelry company was stung by a higher-than-expected tax rate, ongoing economic weakness and high precious metal and diamond costs. Tiffany also cut its full-year earnings forecast and its shares were down about 7.5 per cent in pre-market trading.

European bourses were sharply higher as London’s FTSE 100 index gained 0.93 per cent, Frankfurt’s DAX climbed 0.69 per cent while the Paris CAC 40 advanced 0.95 per cent.

Earlier, Japan’s Nikkei 225 index rose one per cent , Hong Kong’s Hang Seng jumped one per cent and South Korea’s Kospi added 1.2 per cent.

But mainland Chinese stocks extended their slump to a fourth day. The Shanghai Composite Index lost 0.5 per cent to the lowest closing since Jan. 16, 2009 and the smaller Shenzhen Composite Index lost one per cent.